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Tax-Free Savings Account (TFSA)



Frequently asked questions

  • What is a Tax-Free Savings Account (TFSA)?
    A TFSA is so much more than a typical savings account. You can hold a mix of investments (including cash, GICs and mutual funds), and, generally, any investment income you earn is tax-free. That means it’s 100% yours to keep.1

    With a TFSA, your deposits and investments grow quickly through tax-free investing1. Generally, you pay no income tax on investment returns earned in the account, and there are no taxes on the amounts you withdraw.

    See also Question 15, What kind of investments can I hold in a TFSA?
  • How do I open my TFSA today?
    We’d love to meet with you and get you set up. Visit us at a branch or book an appointment to chat with a qualified BMO investment professional.

    1. Book an appointment
    2. Call us at 1-877 CALL BMO
    3. Visit your local BMO branch
  • Who is eligible for a TFSA?
    Most Canadians are eligible. To open a TFSA, you must:

    1. have achieved the age of majority in your province or territory of residence (which is 19 in British Columbia, Newfoundland and Labrador, Nova Scotia, New Brunswick, Northwest Territories, Nunavut and Yukon, and 18 in all other Canadian provinces)2;
    3. be a Canadian resident; and
    4. have Canadian Social Insurance Number (SIN)

    Then you’re ready to go. Book an appointment to get set up.
  • How can a TFSA help me?
    A TFSA account makes sense for just about everybody. Anyone who earns taxable interest in a simple bank savings account can turn it into tax-free interest with a TFSA savings account. Whether you’re saving for travel, home renovations, your children’s education or your own retirement, a TFSA is a good idea. Tip: You can also hold other types of investments in a TFSA.
  • Who is a TFSA best suited for?
    A TFSA is especially well-suited if:

    1. You’ve maximized your Registered Retirement Savings Plan (RRSP) contributions and want additional room for tax-advantaged savings.

    2. You’re saving up for a big purchase and want to access tax-free savings before retirement. Unlike an RRSP, you can withdraw money from a TFSA at any time without tax consequences. (Note: If you have already maximized your TFSA contribution, you must wait until the following year before contributing anything more to your TFSA in order to avoid penalty charges from the Canada Revenue Agency (CRA).) (See Question #19 for more.)

    3. You’re worried that investment income could have a negative impact on government benefits or tax credits that are reduced or eliminated at higher income levels. These include Old Age Security (OAS) benefits, the Guaranteed Income Supplement (GIS) and the federal age credit. Withdrawals from a TFSA have no impact on eligibility for these “income-tested” benefits.
  • What is the 2018 TFSA Contribution Limit?
    The 2018 contribution limit is $5,500.

    If you have unused contribution room, you may be able to invest more.
  • How much can I put in my TFSA?
    A little background for you: Your TFSA contribution room accumulates each year in which you are at least 18 (at any time in the year), have a Canadian Social Insurance Number and are a resident of Canada. The TFSA contribution room for each year (since it began in 2009) is as follows:

    2009$5,000
    2010$5,000
    2011$5,000
    2012$5,000
    2013$5,500
    2014$5,500
    2015$10,000
    2016$5,500
    2017$5,500
    2018$5,500
    For example:If you were 18 or older in 2009, your total eligible contribution room in a TFSA (as of 2018) would be $57,5002
  • How will I know what my TFSA contribution room is for any given tax year?
    The CRA will determine TFSA contribution room for each eligible individual who files an annual T1 individual income tax return. Your financial institution which holds the TFSA will report your contributions and withdrawals, so that CRA will be able to keep track of how much contribution room you have used and how much you have left.
  • What happens if I contribute more than my TFSA contribution room?
    The CRA will impose a tax of one per cent per month, for each month or part of a month that the excess contribution remains in the account. The one per cent tax will continue to apply until:

    1. the entire excess amount is withdrawn; or
    2. for eligible individuals, when the entire excess amount is absorbed by the addition of your unused TFSA contribution room for a later year.

    Visit the CRA web site for more information on over-contributions.
  • How do I open my TFSA today?
    We’d love to meet with you and get you set up. Visit us at a branch or book an appointment to chat with a qualified BMO investment professional.

    1. Book an appointment

    2. Call us at 1-877 CALL BMO

    3. Visit your local BMO branch
  • What are your TFSA Savings Account and GIC rates?
    View our BMO Bank of Montreal TFSA Savings Account rates, or visit a branch to discuss our limited-time TFSA offers.
  • Do you have different types of TFSAs?
    We do! They are:

    An investment TFSA: In this TFSA, you can hold a mix of investments (including savings, market-linked GICs and mutual funds), which can help you grow your savings. You can open this at a branch or by phone.

    A basic savings TFSA: In this TFSA, you can hold cash in a savings account, and you can open this online.
  • Are there any fees for contributions, withdrawals or transfers for the BMO TFSA?
    There are no fees for contributions to a BMO TFSA. There is a $50.00 fee for transfers to another financial institution.
  • Can I transfer my TFSA at another financial institution to a BMO TFSA?
    You sure can—and we can help.

    You can transfer your TFSA at another financial institution to a BMO TFSA. Here’s how:

    1. Visit your local BMO branch to complete a transfer form (find a branch near you)
    2. We will then send the transfer form to the financial institution that currently holds your TFSA to ensure that the transfer does not impact your contribution limit. This is called a 'qualifying transfer.'

    Please note the other financial institution may apply a fee for this transfer.
  • What kind of investments can I hold in a TFSA?
    A TFSA is generally permitted to hold similar investments that a RRSP can hold. This includes cash, mutual funds, ETFs, publicly traded securities, GICs (including market-linked GICs) and bonds. We can help you think through the best option for you, and direct you to the appropriate BMO partner if you are looking for an investment option we cannot offer in the branch.

    Think of it as a savings and investments 'bucket.' You can fill it with a mix of investments that align with your goals—whether it’s saving for a trip, renovating your home, or putting money away for a rainy day.
  • What are the best TFSA investments for me?
    It really depends on your investment goals (are you saving for short-term, long-term, or both?) and your tolerance for risk. A TFSA should be part of an overall financial planning strategy that takes assets, liabilities, goals, income needs, risk and tax into consideration.

    Sit down with us, and we can chat about the best investment mix for you. Book an appointment
  • How is a TFSA different from an RRSP?
    Great question—this chart breaks things down some of the differences between a Tax-Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP):

    TFSARRSP
    You don’t need to have any income to accumulate contribution room.You must have income in order to accumulate contribution room.
    Contributions to a TFSA are not tax-deductible on your income tax return.Contributions to your RRSP are tax-deductible on your income tax return
    Withdrawals from a TFSA are tax-free. Any amount withdrawn (excluding qualifying transfers) is then added to your contribution room in the following year, so that you could later re-contribute the amount that you withdrew.Withdrawals from an RRSP are taxed in the year of withdrawal (with the exception of the Home Buyer’s Plan (HBP) and Lifelong Learning Plan (LLP) which are not taxed provided they are repaid on schedule). Any amount withdrawn cannot be added to your contribution room in the following year.
    There is no requirement to convert the TFSA to an income payment option (e.g. a RIF or an annuity) at any age.A RRSP must be fully withdrawn or be transferred to a Retirement Income Fund (RIF) or annuity by the end of the year you turn 71.
  • Can I withdraw my money at any time?
    Generally, you can withdraw any amount from your TFSA at any time, but this will depend on the type of investments held in your TFSA. For example, if you locked in a GIC rate for two years, you may have to wait until the end of your term to withdraw money.
  • If I withdraw money from my TFSA, can I re-contribute the money later on?
    Short answer: Yes, but maybe not right away.

    Long answer: Any withdrawals (other than qualifying transfers) from your TFSA in a year will be added to your contribution room the following year. If you have contributed the maximum amount allowed to a TFSA and you withdraw any of your money, you must wait until the following year to contribute again—otherwise you will incur a tax penalty from the Canada Revenue Agency.

    Example: In January 2017, Sophia opened her first TFSA and contributed the maximum of $52,000. In June 2017, she withdraws $7,000. The earliest Sophia can re-contribute the $7,000 without incurring a penalty is January 1, 2018.

    Visit the CRA web site for more information on withdrawals and qualifying transfers.
  • How do contributions and withdrawals impact my taxes and income-tested benefits?
    Contributions to a TFSA are not deductible for tax purposes. Both earnings and withdrawals are tax-free and do not impact federal income-tested benefits.
  • Is interest on money borrowed to contribute to my TFSA tax-deductible?
    No. Interest on money borrowed to invest in a TFSA is not deductible for tax purposes.
  • Can I contribute to my spouse's or common law partner's TFSA?
    Unfortunately not. Only the TFSA account holder can contribute to his or her own account. However, you could give money to your spouse or common-law partner and he or she could then contribute that money to his or her own TFSA.
  • If I give funds to my spouse or common-law partner to contribute to his or her TFSA, will I be taxed on the withdrawals or income earned in his or her TFSA?
    Withdrawals and income earned in the TFSA are not taxable to either you or your spouse or common-law partner regardless of whose money was used to make the contribution.1
  • Can I open a joint TFSA with my spouse or someone else?
    No. Similar to other registered accounts, such as RRSPs, joint TFSAs are not allowed.
  • Can I open more than one TFSA?
    You sure can. You can open more than one TFSA, but the total contributions to all your TFSA accounts cannot be more than your total accumulated contribution room.

    Ready to open a BMO TFSA? We’re ready to help. Make an appointment today.

Helpful Tools and Resources

Your future is full of long-term goals. Can a TFSA be there for you?

Is a TFSA right for your long-term goals?

A TFSA can help you reach your long-term goals, and even play a role in your retirement plans.
We all have short-term goals. Is a TFSA the answer?

Can a TFSA help with short-term goals?

A TFSA can be a great solution when you’re investing for a goal that’s one to three years away.
Understanding TFSAs: The basics

Understanding TFSAs: The basics

Not sure how a TFSA works? Brush up on the basics in just a few minutes

Calculators

Open a TFSA today

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